People often point to MS's continued profitability in these discussions, but they're missing the point. The question isn't whether they're profitable today, but whether they're profitable and relevant in ten or twenty years.
Profits are a lagging indicator for a once-successful company. A large company with entrenched products can coast for a long time while in decline. For example, RIM basically sank in 2007-2008. They had opportunities to save themselves well after that, but that's when it started, and they passed up those opportunities. However, their decline didn't really show up in their financials until 2012.
Microsoft looks to me like they're the same way. Surface and the new Windows Phone are analogous to RIM's late, lame attempts to ship a large-touchscreen Blackberry. Microsoft is profitable for the same reason they've been profitable for the past couple of decades: Windows and Office. However, that's now a declining market. It's still huge, and they can milk it for a long time, but it's on the way out. It looks like they missed their chance to move on to something else in favor of hanging on to their cash cows as they sink.
That's only if you ignore the enterprise. SharePoint, Exchange, SQL Server and Active Directory are dominant forces there and that wasn't the case in 2000. Microsoft's enterprise activities are very profitable and they are growing fast.
It's mostly my opinion, based on the rise of mobile. I don't think they're going to go away, but it does seem like they're already becoming more specialized. Hardcore gamers will always be with us, but the much larger casual market is moving away.
I think the numbers back it up to an extent, though:
None of the latest generation of consoles are near the top, despite the fact that populations are larger, and the population of people able to afford video game electronics is much larger. That the PS3 and Xbox 360 barely outsold the original NES, despite having access to a billion or two more potential customers, says to me that the market is declining relative to the overall computing world.
If you only look at individual console you might get that impression, but if you take the generation's totals you'll still see an upward trend.
The Playstation 2 for example was king of the hill and dwarfed its competition (Gamecube/Xbox) but still overall you're looking at about ~200 million units. However, with the current generation you're looking at Wii, PS3, X360 all sharing an about even share with PS3 and X360 very closely tied, but the total is around ~250 million units.
So we're still seeing growth in that area, and one part that's not reflected is the added value in each platform in terms of revenue for each network (PSN, Xbox Live) as well as the growing list of peripherals (Kinect, Move) that are part of each platform.
Not only that, but PS3 and X360 had higher prices on their consoles, some even coming close to doubling the price (a top of the line PS3 at launch was $600 vs a $300 PS2).
I would say that gaming over all is becoming more mainstream to the point that the consoles are no longer the realm of hardcore gamers, because they wouldn't have kept those numbers up while people were buying iPads, iPhones and DS3's in such massive quantities if they were really a complete gaming replacement.
Profits are a lagging indicator for a once-successful company. A large company with entrenched products can coast for a long time while in decline. For example, RIM basically sank in 2007-2008. They had opportunities to save themselves well after that, but that's when it started, and they passed up those opportunities. However, their decline didn't really show up in their financials until 2012.
Microsoft looks to me like they're the same way. Surface and the new Windows Phone are analogous to RIM's late, lame attempts to ship a large-touchscreen Blackberry. Microsoft is profitable for the same reason they've been profitable for the past couple of decades: Windows and Office. However, that's now a declining market. It's still huge, and they can milk it for a long time, but it's on the way out. It looks like they missed their chance to move on to something else in favor of hanging on to their cash cows as they sink.